Question 1 es the folowi n drer ent dink. The beversge is sold for so cents per

Question

Question 1 es the folowi n drer ent dink. The beversge is sold for so cents per i6-ounce bottle to retalers, who charge customers 75 cents per botte. For the Sales Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed $1,870,000 Selling expenses-variable 400,000 Selling expenses-fixed 360,000 Administrative expenses-variable 450,000 Administrative expenses-fixed 304,000 $50,000 55,000 49,000 $2,000 Prepare a CVP income statement for 2017 based on management's estimates. JORGE COMPANY

Explanation / Answer

CVP INCOME STATEMENT Sales revenue 1870000 Less: variable cost material 400000 Direct labour 360000 Manufacturing OH-Vvraiable 450000 Selling expense-variable 50000 Admin Expense-Variable 49000 Total Variable cost 1309000 Contribution margin 561000 Less: Fixed cost Fixed Manufacturing Oh 304000 Selling expen-Fixed 55000 Admin Expense-Fixe 52000 Net income 150000 Numbr of Bottles: 1870,000 /0.5 = 3740,000 bottles Variable cost per unit: Total variable cost/ Number of bottles = 1309,000/3740000 = 0.35 per unit Contribution margin = 0.5 -0.35 = 0.15 per botlle CM ratio: 0.15 /0.50 *100   =30% Break even in bottles: Fixed cost / Contribution per unit = 411000/0.15 = 2740,000 Break even in $: Fixed cost/ CM ratio=411000/30% = $ 1370,000 CM ratio= Contribution/ Sellin price *100 =0.15 /0.5 *100 = 30% Margin of safety: Margin of safety =Total sales -Break even sales = 1870,000- 1370,000 = 500,000 $ Margin of safety ratio = 500,000 /1870000 *100 =6.74% Desired profits: $ 165000 Desired contribution = 165000+411000 = $576,000 Traget sales in $: Desired contribution/ Cm ratio = 576000 /30% = $1920,000

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